What the papers say- 22nd – 23rd August 2009

Published 25/08/2009

Mortgage news was brief but varied in this weekend’s financial press. The Daily Mail reported on the thousands of borrowers who took interest only mortgages in 2006 and 2007, many of whom stated at the time that they had no method of repaying the loan at the end of their mortgage term. With a decrease in property prices since then, a large number of homeowners have found themselves in negative equity and unable to sell their homes. Experts urged borrowers to switch to a repayment mortgage if it was affordable to do so, or alternatively to overpay on their mortgage as often as possible in order to reduce the debt. The Sunday Telegraph looked at the customers currently paying 0% on tracker rates taken out a couple of years ago who face considerable increases in payment when their deal comes to an end. They were advised not to get used to the lower payments, but to do their research in advance and be aware of the follow on rate, and the options available for a new deal. Elsewhere Northern Rock were under fire again, this time for apparently randomly selecting existing customers to be eligible for new deals, whilst turning away others, and there was news that the Chelsea Building Society could be party demutualised in the same way as the failing West Bromwich Building Society, following news of a suspected £41m of mortgage fraud, and first-half losses of £26m. Savings news this weekend focused heavily on Child Trust Funds, as the 2nd £250 Government voucher is issued to around 600,000 7 year olds next month. HMRC figures suggest that more than 1 million households let the previous voucher expire, so parents were urged to review the market this time round and make good use of the money for their children’s future.

Think carefully before securing other debts against your home. Your home or property may be repossessed if you do not keep up repayments on your mortgage.

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Representative example A mortgage of £188,578 payable over 22 years, initially on a fixed rate until 31/12/23 at 2.19% and then on a variable rate of 4.74% for the remaining 17 years would require 62 payments of £900.79 and 202 payments of £1,094.12. The total amount payable would be £276,994 made up of the loan amount plus interest (£88,283) and fees (£133). The overall cost for comparison is 3.7% APRC representative.

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